Tryg Baltica International (UK) Ltd. v Boston Compania De Seguros SA & Ors [2004] EWHC 1186 (Comm)

[2004] EWHC 1186 (Comm)Case No 2003/557
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 28/05/2004
Before
THE HONOURABLE MR JUSTICE COOKE
Between
TRYG BALTICA INTERNATIONAL (UK) LTDClaimantBOSTON COMPANIA De SEGUROS SA & ORS.Defendant
Mr Richard Millett QC and Mr Stephen Houseman (instructed by Clyde & Co, Solicitors, London) for ClaimantMr Simon Croall (instructed by (i) Waterson Hicks, Solicitors, London, (ii) Norton Rose, Solicitors, London and (iii) BLG, Solicitors, London) for DefendantsHearing Hearing dates: 19 th and 20 th May 2004
Judgment

Introduction

[1]On 17th June 2003, the Claimant (Tryg) obtained permission to issue and serve the claim form in this action on the four Defendants in Argentina. Each of those Defendants now applies for that Order to be set aside or for the proceedings to be stayed. The Defendants maintain that the Claimant cannot establish a serious issue to be tried in respect of some of the claims put forward and that Argentina is, in any event, the appropriate forum for determination of any dispute between them. Additionally, each Defendant contends that, in making its application for permission to serve proceedings out of the jurisdiction, Tryg omitted to inform the Court of facts which were material to the Court’s consideration of the issues and that, for this reason also, the Order giving permission to serve outside the jurisdiction should be set aside.[2]Tryg is an insurance company based in London which reinsured the risks which are the subject of these proceedings from 10th April 1999 onwards, having taken over the reinsurance of such risks from the Independent Insurance Company which is in run-off. Risks were renewed for each of the two years commencing 1st July 1999. The four Defendants are Argentine insurance companies who insured various Argentinian railway companies in respect of liability to passengers or cargo. There were 22 original policies in favour of the railway companies which were the subject of 13 Reinsurances in respect of those liabilities.[3]It is common ground between the parties, although the significance of the fact is in issue, that the 4 Defendants were “fronting” companies in that they retained virtually none of the risks which they insured. In some cases there was no retention, whilst in others the retention ranged between 0.5% and 2%. The history, to which the Defendants point, indicates that in a number of instances renewals of the reinsurance may have been put in place prior to the conclusion of the insurance arrangements with the Defendants who were interposed with the benefit of the reinsurance which had been prearranged.[4]In or about 1984, the Argentine State Railway Network was privatised. Prior to that privatisation, the insurance of the railway companies had been arranged through State controlled Insurers and/or Reinsurers. The effect of privatisation was that they could no longer rely upon such insurance or reinsurance arrangements. It was a requirement of Argentine law that the companies insuring the Argentine railways had to be based in Argentina but, given the inadequate capacity of private Insurers and their reluctance to take on these risks, arrangements were made for reinsurance abroad with Argentine companies to act as fronting companies with limited or no net liability. It is the Defendants’ evidence that the only way in practice in which cover could be obtained was by obtaining such reinsurance cover with foreign Insurers.[5]No particulars of claim have as yet been served. All that exists is the general endorsement of the claim form with a list of the relevant contracts of reinsurance in Schedule 1 and, in Schedule 2, a long computerised spreadsheet setting out a list of losses on the original insurances written by the Defendants, the dates of the incident giving rise to loss, the date of notification to the Defendants, the date of notification to Tryg and the amount of the gross claim, the deductible and the net claim. The claim seeks relief in the form of declarations against each of the Defendants, as follows: “1.(a) that the contracts of reinsurance to which the Claimant subscribed, particulars of which are set out in schedule 1 hereto (“the reinsurance contracts”), are not subject to “pessification” pursuant to Decrees 214 and 320 of 2002 promulgated by the Government of Argentina or other such similar acts, decrees or orders of the Government of Argentina and that the currency of the reinsurance contracts, including its limits and deductibles, remains US Dollars, notwithstanding that the original insurance contracts underwritten by such Defendants may have been “pessified” by such decrees, acts or orders and(b) that the limits and deductibles under the reinsurance contracts shall be applied to each claim in US Dollars at the US Dollar equivalent of Argentinian Pesos at the exchange rate prevailing at the date of the ascertainment of the relevant loss the subject of indemnity thereunder 2. A declaration that the Claimant is not liable under the reinsurance contracts to pay the claims made or to be made in respect of the losses or occurrences notified by the Defendants to the Claimant as set out in schedule 2 hereto, in each case by reason of the relevant Defendant’s breach of the condition precedent contained in each of the contracts of reinsurance requiring immediate notification, or notification as soon as practicable and without undue delay, as the case may be, of such losses or occurrences to the Claimant. 3. Further or alternatively to paragraph 2 above, a declaration that the Claimant is not liable to indemnify the Defendants or any of them under the reinsurance contracts save on proof by the relevant Defendant that (a) they have taken all defences to the claims against them available under Argentinian law under the original policies underwritten by them and have preserved all their rights and the subrogated rights of the Claimant, where applicable, against the original assureds under such policies or the original third party claimants, further or alternatively (b) that where claims, losses and occurrences the subject of any Defendant’s claim for indemnity have been paid or settled by any Defendant, that the claims so settled fell within the scope of the original policies underwritten by them and within the relevant reinsurance contracts and/or that such settlements were prudent and business-like. 4. A declaration that the Claimant is not liable to indemnify any Defendant in respect of any claims by any original assureds against such Defendant for legal costs, fees or expenses under the relevant original policies, whether or not the original policies cover such legal costs, fees or expenses, nor in respect of any legal fees, costs or expenses incurred by any Defendant in dealing with any claim under the relevant original policies ………” (b) that the limits and deductibles under the reinsurance contracts shall be applied to each claim in US Dollars at the US Dollar equivalent of Argentinian Pesos at the exchange rate prevailing at the date of the ascertainment of the relevant loss the subject of indemnity thereunder (a) they have taken all defences to the claims against them available under Argentinian law under the original policies underwritten by them and have preserved all their rights and the subrogated rights of the Claimant, where applicable, against the original assureds under such policies or the original third party claimants, further or alternatively (b) that where claims, losses and occurrences the subject of any Defendant’s claim for indemnity have been paid or settled by any Defendant, that the claims so settled fell within the scope of the original policies underwritten by them and within the relevant reinsurance contracts and/or that such settlements were prudent and business-like. 4. A declaration that the Claimant is not liable to indemnify any Defendant in respect of any claims by any original assureds against such Defendant for legal costs, fees or expenses under the relevant original policies, whether or not the original policies cover such legal costs, fees or expenses, nor in respect of any legal fees, costs or expenses incurred by any Defendant in dealing with any claim under the relevant original policies ………” i) The first declaration sought therefore essentially involves a question of construction of the contracts of reinsurance on the assumption that the original insurance contracts written by the Defendants which are governed by Argentinian law are, by virtue of changes in that law, to be treated as expressed in Pesos and not US$ as originally written. ii) The second declaration sought is a declaration of negative liability in respect of all the losses set out in Schedule 2, although, for reasons which appear later, it now appears that only a limited number of these may now be in issue. The allegation made by Tryg is that the Defendants have failed to give appropriate notice under the Reinsurances and are thus in breach of condition precedent and no liability therefore falls on Tryg. Issues of fact therefore arise in relation to notification to the Defendants, the Defendants’ knowledge of the position and the notice given by the Defendants to Tryg, quite apart from any issues of construction of the reinsurance contracts. iii) The third declaration sought takes a rather different form in as much as Tryg seeks a declaration of non-liability unless the Defendants meet the burden of proof in establishing that which is said to be required under the “Follow the settlements” clauses in the Reinsurances. It appeared that the Claimants were really intent on obtaining rulings as to whether any failure by the Defendants to take the defence of late notification by their insured could relieve Tryg from liability under the Reinsurances. iv) The fourth declaration sought raises a matter of construction of the reinsurance contracts once again.

The Requirements of CPR Part 6.20(5)(a), (b) and (c)

(a) , (b) and (c)

[6]Although it was originally an issue between the parties on the evidence adduced by them, the Defendants’ skeleton argument conceded that Tryg had made out a sufficiently arguable case that the contracts of reinsurance were made in England so that the requirements of Part 6.20(5)(a) had been met. It was not conceded that the reinsurance contracts were made by or through an agent trading or residing within the jurisdiction or were governed by English law. Despite some confusion in the evidence adduced by the Defendants however, it is clear that there were two Argentinian insurance and reinsurance brokers by the name of Surbroker (Mark Smith) and Ayling Marsh McLennan who worked together to put together a structure of insurance of the Railway companies in Argentina and reinsurance through HSBC Insurance Brokers in London. It was initially contended in witness statements on behalf of the Defendants that HSBC acted as agents of Tryg, whilst maintaining that the precise role of the Argentinian Brokers remained unclear. When the Facility Agreement between Tryg and HSBC is examined it is clear that HSBC had no authority to underwrite and had to seek Tryg’s underwriting decision on any risk which was to be bound. In accordance with decided authority, the position of the Argentine brokers is not difficult to fathom. Between them Ayling Marsh and Surbroker acted for the original Insureds in obtaining insurance cover and for the Defendant Reinsureds in obtaining the reinsurances, even if the latter were put in place prior to the former – see The Zephyr [1985] 2 LLR 529.[7]The position of HSBC is also clear enough for current purposes. HSBC was never given any underwriting authority on behalf of Tryg and the only direct evidence adduced shows that HSBC effectively broked the facility to Tryg at the instance of Surbroker in March/April 1999 and thereafter acted as placing brokers in respect of the reinsurance contracts entered into and subsequently renewed. HSBC were empowered to issue Certificates, only after Tryg had written the risks. Under the terms of the Facility Agreement, HSBC had a limited administrative role but each and every underwriting decision had to be referred to Tryg for acceptance and rating. Mark Smith’s e-mails from Surbroker to Mark Baptiste of HSBC illustrate HSBC’s activity on Surbroker’s behalf in negotiating renewal terms with Tryg in July 2000, August 2000 and October 2000. Equally, as Mr Clark’s statement reveals, HSBC acted as traditional claims brokers for the Defendants in respect of claims or potential claims under the Reinsurances. They were remunerated by payment of brokerage in the ordinary way and did not receive any additional payment for services rendered to Tryg under the Facility Agreement. It is clear therefore that not only does Tryg have a good arguable case that the contracts of reinsurance were made within the jurisdiction but that they were also made by or through an agent trading within the jurisdiction, namely HSBC.[8]Tryg also maintains that the Reinsurances are governed by English law. Tryg rely in this connection upon Credit Lyonnais v New Hampshire Insurance Co [1997] 2 LLR1. Although the Defendants do not formally concede this, they do not put forward any positive case or any process of reasoning to justify the application of any other law. The only possible rival contender for applicable law is Argentina, because of the connection with the underlying policies but it appears to me that the most obvious inference from all the circumstances in which the Reinsurances were written is that the parties must have intended English law to apply. The reinsurance contracts were, as already indicated, made in England, in the London market. The presentations were made to Tryg in London, the slips were scratched in London and the wordings were agreed in London on London market forms. The certificates of reinsurance were issued in London by HSBC, operating under the facility agreement and superseded the off-slips which had been scratched by Tryg. All the contractual and relevant pre-contractual documentation is expressed in English. In my judgment Tryg are correct in saying that the reinsurance contracts are governed by English law under the terms of Article 3(1) of the Rome Convention (implied choice of English law) or under Article 4(2) of the same Convention on the basis of Tryg’s central administration being in this country.[9]This is a matter of significance, not only for the purpose of CPR 6.20(5) but also because of the impact which this has in relation to the issues which fall to be determined, whether in the Courts of this country or elsewhere.

Are there serious issues to be tried?

[10]The Defendants, between them, contend that the claims for the second, third and fourth declarations do not give rise to serious issues to be tried but accept that the “pessification” issue (Declaration 1) does have this qualifying characteristic. The test is the same as that under CPR Part 24, namely whether Tryg has a realistic prospect of success in relation to each of the Declarations sought. Allied with this ground of opposition however, the Defendants also maintain that the claims do not satisfy the test of practical utility laid down in the decisions of the Courts relating to the grant of negative declarations.[11]Mr Croall for the Defendants referred to the Volvox Hollandia [1998] 2LLR 361 and to Messier-Dowty Limited v Sabena SA [2000] 1 WLR 2040 at paragraphs 41-42 and to the New Hampshire Insurance Co v Philips Electronics North America Corp. [1998] CLC 1062 at 1066-1067 where the Court of Appeal approved the following four principles set out by Rix J (as he then was) in the context of applications for negative declarations. “…….. 1. There is power to grant a negative declaration in an appropriate case, the fundamental test being whether it would be useful. 2. However, careful scrutiny will be exercised not only to test the utility, or the futility, of seeking to determine the claim by means of a negative declaration in England, but also to ensure that inappropriate forum shopping is not allowed, let alone encouraged. 3. A negative declaration will not be appropriate where it is premature or hypothetical, viz where no claim has been made or threatened against the plaintiff. 4. The existence of imminent or a fortiori current foreign proceedings is always a highly relevant consideration, not only for the purpose of testing the utility of the English claim, but also so as to having in mind the need to avoid the twin dangers of forum shopping and of the vices of concurrent proceedings.”[12]So far as the fourth declaration is concerned, the first and fourth Defendants’ application form did not suggest that there was no serious issue to be tried on this point whilst the applications of the second and third Defendants did advance such a contention, but the conclusion must be the same for all the Defendants, regardless of the difference in the form of applications. The case of all four was presented by Mr Croall on this basis. As with the first declaration sought, the question on the fourth declaration is one of construction of the reinsurance contracts, against whatever relevant background there may be, and is therefore a question of law.

The First Declaration

[13]It is accepted by the Defendants that there is a serious issue to be tried in respect of the issue of pessification but Mr Croall maintains that the Court should set aside permission to serve the application for this declaration because it serves no practical utility. It is said that the real issue here relates to the underlying insurances and the effect of pessification upon those contracts since that area is uncertain as a matter of the law of Argentina and that if pessification does not arise there, it will not arise in respect of the Reinsurances at all. Thus, until the position is known as to the effect on the underlying insurances, there is no point in hearing the application relating to the Reinsurances. The relief sought therefore is both premature and hypothetical in that the point may never arise. The Defendants also said that it was possible that, since the Argentine Courts decide pessification issues on a case-by-case basis, some but not other insurances might be affected or affected in different ways. Suggested distinctions were made between cases involving personal injury, property damage or those involving foreigners but it was hard to see how policies could be affected differently. Either the pessification decrees would apply to “pessify” the deductible or the claim or they would not.[14]The Defendants also contended that the position would essentially be resolved by any decisions made by the Argentine Courts in relation to the underlying insurances. On the basis of the decisions in Vesta v Butcher [1989] AC 852 and Groupama Navigation v Catatumbo [2000] 2LLR 350, it was said that the scope of the reinsurance would inevitably be the same as that of the underlying insurance, whatever the applicable law to both sets of contracts. Reference was made to the simultaneous payments clauses in some of the underlying insurance policies. Self evidently, however there is room for considerable debate about the extension of the principles in the decided authorities to the current situation, since the impact of a local currency law on a policy governed by that law is not automatically to be equated to the situations to be found in the authorities referred to.[15]This is the very point which Tryg seeks to have determined, as set out in paragraph 1a of the claim form. It works upon the assumption that the original insurance contracts might be pessified and asks the Court to determine the impact upon the scope of the Reinsurances and in particular, in sub-paragraph b, on the scope of the limits and deductibles.[16]In my judgment, it cannot be said that the application serves no useful purpose or is premature. Tryg fears the threat or contention of pessification of the Reinsurances if the Insurances are found to be pessified. The Defendants have specifically made the point that the Reinsurances will fall to be pessified if the insurances are held to be so. There is therefore a real issue between the parties on this point.[17]The question is essentially one of construction of the Reinsurances which are governed by English law as I have already held. Tryg have realistic prospects of success on this issue, as the Defendants recognise and the form of the declaration sought is sufficiently focused in relation to the Reinsurances and does not need to be tailored to individual Reinsurances or individual underlying insurances. If the point can be determined in respect of the Reinsurances, regardless of the application of pessification to the underlying insurances, as Tryg contends, this will clarify the position for Tryg in its approach to the run-off of the covers and will determine the allocation of risk between Tryg and the Defendants in relation to the acts of the Argentinian government. Tryg could wait and refuse to pay claims as they emerge after pessification, but there is clear benefit in determining the issue of principle in advance.

The Second Declaration

[18]The form of declaration sought relates to the losses notified to Tryg set out in Schedule 2 to the Claim form and therefore, on its face, requires the Court to investigate the circumstances of each of 2530 separate losses to ascertain whether or not there has been a breach of the condition precedent contained in the contracts of reinsurance requiring notification within a prescribed period. The terms of 7 of the 13 Reinsurances contain different notification provisions, all in the shape of conditions precedent to liability, which Tryg have categorised into four types namely:- i) Provisions which require immediate notification by the Reinsured upon “knowledge of any losses and occurrences which may give rise to a claim recoverable hereunder.” ii) Provisions which require notification “as soon as is practicable and without undue delay” upon “knowledge of any loss or losses which may give rise to a claim recoverable hereunder”. iii) Provisions which require notification “as soon as is practicable and without undue delay,” upon knowledge that the initial or subsequent estimate for a loss is over 50% of the applicable deductible or upon knowledge that, irrespective of any estimate, the loss involves death, brain injury, spinal injury or one of a number of other serious injuries to the person. These provisions also require that the Reinsured should appoint nominated loss adjusters and/or one of the agreed panel of lawyers, if so required by Tryg. iv) Provisions to the same effect as those in (iii) above save that the names of the agreed loss adjusters and local lawyers are altered. All four types of clause are expressed to be conditions precedent to claims under the Reinsurances and, once the point is in issue, it is clear that the burden is upon the Defendants to establish compliance with these conditions precedent.[19]The Defendants say that Schedule 2 to the claim form is a wholly inadequate basis for the pursuit of the declaration and that Tryg has produced no substantial evidence in support of its case. Tryg maintains that the Schedule shows a good prima facie case of failure to comply with the provisions of at least some of the Reinsurances. 2,530 separate claims are referred to in schedule 2, all with clear dates set out for the date of loss. The Schedule then sets out for some losses, but not for others, the date of notification to the Insurer and the date of notification to HSBC and later to Tryg itself. Where there is no date for actual notice to the Insurer, the Schedule includes a presumed date for such notification. No evidence has been adduced by Tryg as to the composition of this Schedule which was formulated by forensic accountants after examination of some of the Defendants’ documents in Argentina and the basis upon which the presumed dates of notification to the Defendants is put forward is no more than an average of the period between the dates of loss and the dates of notification to the Insurers, where known. Examples were given in submissions and evidence of mistakes or inconsistencies with the available documents, but although the material in this schedule has been available to the Defendants for the better part of a year, no counter-schedule has been produced nor any evidence to suggest that it can be ignored in its entirety. A separate schedule was produced in evidence by Tryg in opposition to the Application which clearly showed that extensive delays in notification by the Reinsureds had taken place and that Tryg had constantly asked when the Reinsured were first aware of loss when receiving belated notice, without usually obtaining any response. The correspondence with Surbroker showed clearly that ascertaining the date when reserves were set by the Reinsureds was not a problem, but that information was never produced to Tryg.[20]The Defendants say that only 70 listed losses contain actual dates of notification to the Defendants and notification to Tryg and that the Schedule not only fails to identify which losses relate to Reinsurances with condition precedent clauses but completely ignores the issue of the knowledge of the Defendants and the first point at which they concluded that the claim in question might exceed the deductible. It was said that this issue involved a subjective judgment call on the part of the Defendants as to the likelihood of the claim exceeding the deductible, which is not even addressed as an issue in the Schedule and that therefore Tryg had not made out a case.[21]The Defendants also point to a fax of 20 December 2000 from Surbroker to HSBC in which the following appears:
“On a separate matter I would like to reconfirm the situation with regards to application of the Claims Cooperation Clause on current reinsurance placements with Colonia Baltica. We have reconfirmed to the various Cedants that by way of the clause in question they are required to advise London when on the basis of the information available to them relating to any specific incident it is their view that there could be a payment to third parties that would exceed the applicable deductible.”
The Defendants put forward various arguments as to the mutual understanding of the parties about the procedure for notification, suggesting that all the different clauses were understood in the manner suggested by this paragraph in the fax. They drew attention to the evidence of Mr Clark, Tryg’s Claims Manager in this context.[22]Additionally, the Defendants pursued arguments that there has been a variation of the procedure or a waiver or estoppel which allowed notification to be made, not to the Reinsurers in London, but to loss adjusters or lawyers appointed in Argentina to deal with the claims. In this contention they relied on a letter of 17th November 2000 from Tryg. They thus maintain that there has been a wholesale failure by Tryg to put forward an arguable case as to failure to comply with the notification provision.[23]By way of answer, Tryg contends that the question of the knowledge of the Defendants is one which can only be a matter of inference until disclosure takes place and that the Schedule shows the extent of the delays which have occurred since the original incident, which point to breaches of the conditions precedent clauses. Moreover Tryg maintains that there is no question of challenging the Defendants’ judgment call as to the size of the claim- the issue is simply when the Defendants came to appreciate that the claim might be of the prescribed size, which should be readily discernable from the Defendants own documents and what they then did by way of notification. These documents should show when they first put a value on any claim of 50% of, or more than, the deductible, as the case may be, by making a reserve in that amount or accepting the loss adjuster’s or lawyer’s recommendation to that effect, even if it had not done so, on first becoming aware of a claim. Moreover the terms of the 3rd and 4th type of clause required immediate notification of all losses involving death, brain injury and various other forms of serious personal injury, regardless of the estimate of loss. Although the Schedule does not descend into any particularity as to any individual claim and the applicable reinsurance provisions, treating them all as if the same notification provision applied, if it is taken at face value, it represents a case from which it can be inferred that notification was not made in accordance with the reinsurance provisions in at least a sufficient number of cases. Whilst a number of individual items have been contradicted in the evidence, the number of claims involved are small, compared with the overall position as set out in the schedule which reveals a significant number of serious delays in notification of 30 days or more, three months or more and six months or more. The second schedule supports this case.[24]The Defendants say that out of the 2,530 claims, only about 6% give rise to any possible claim on the reinsurance because the others cannot possibly exceed the deductibles. This is interesting as notification has apparently been made for them all even though only 157 claims would exceed the deductible on this basis, assuming that pessification does not affect the issue, which it might well do since the Peso is now worth about a third of the US Dollar. The Defendants’ analysis is that of these 157 claims, only 82 relate to reinsurances where there was a claims notification requirement.[25]It is clear that the Defendants have carried out some analysis of the schedule in order to arrive at the position they have adopted and the contentions they advance, but they have not been able to contradict the overall thrust of the schedule and the dates referred to. Although there is no direct evidence in the sense of documentary support for all of the dates set out in that schedule, it has been put forward and remains uncontradicted in its general approach. The Defendants cannot and do not say that Tryg has no real prospects of success on each and every item in the schedule.[26]There may be issues which the Defendants would wish to raise as to the agreed procedure for notification but the terms of the conditions precedent clauses and schedule 2 to the Claim form, supported by the later schedule and the documents from which it is drawn show a strong prima facie case of substantial delay in notification by the Reinsured. Mr Richard Millett QC for Tryg bases his case on the assumption of timely reserving by the Reinsured. Tryg is prepared to treat the date of estimate or reserving by the Defendants at more than the deductible (or at 50% thereof where applicable) as the date of knowledge for the purpose of each of the different types of notification clause, save for those involving death or serious injury, where notification to the Reinsured of that fact would constitute the relevant point. There is thus no question of subjective judgment involved here since Tryg are not suggesting an earlier date of knowledge or constructive knowledge when the Reinsured either knew or should have known that a particular loss or occurrence might give rise to a claim under the reinsurance in question. The Schedule could not contain a column setting out the date of knowledge of the Reinsureds, whether on this basis or any other because that is material which remains in the hands of the Defendants alone and which, for the most part, they have refused to give.[27]Whether or not the clause was of type 1, 2, 3 or 4, there is plainly an issue here that needs to be determined. If there is no claim on the Reinsurances in respect of many of the losses then the issue raised with respect to them is indeed academic, but there are enough items where this is not the case and inferences are capable of being drawn. Tryg’s case requires particularisation, but Particulars of Claim have not yet been served and the question whether or not inferences of late notification are validly drawn cannot be finally determined at this point. When disclosure occurs, it will be much clearer whether the inferences to which the Schedule gives rise can be sustained.[28]Tryg has answers to the contentions raised with regard to supposed dilution of the conditions precedent clauses or different agreed procedures for notification. Mr Clark’s evidence was not that the 20th December fax contained an agreed summary of those clauses nor that it constituted an adequate reflection of the totality of their provisions. He was prepared to accept that the essence of the clauses was the requirement to advise London when the Reinsureds appreciated that there could be a payment out to third party claimants which would exceed the applicable deductible, seeing the 50% provision as being very much to the same effect. That did not alter the terms of the conditions precedent clauses so far as he was concerned and there was no evidence that he had ever agreed to any variation of this kind or any dilution of the clauses set out above.[29]The letter of 17th November 2000 from Tryg equally, Tryg says, did not vary any requirement for notice to itself but provided for an additional notice to Santa Marina so that the claims could be more expeditiously handled. Loss adjusters and lawyers were always appointed by the Reinsureds, albeit with the approval of Tryg, but they did not thus become Tryg’s agents for the receipt of notifications under the terms of the Reinsurances.[30]In so far as the Defendants wish to raise an argument in relation to waiver or estoppel or variation of the notification clauses, the evidence produced is not only inconclusive but inadequate and highlights the existence of real issues which the Defendants maintain are effectively unarguable. Tryg therefore does have realistic prospects of success on the application for this declaration, at least in relation to some of the losses referred to in the Schedule.[31]Tryg has suggested that Case Management would result in sample claims from the Schedule being determined. It is clear that the number of claims on the Reinsurances where points of late notification truly arise is much more limited than the Claim form and Schedule 2 indicate so that, when particularisation is done in the Particulars of Claim, as it would have to be, the Schedule would be much reduced. It would however be futile to set aside service of the claim for this declaration on the basis that some of the claims had no prospect of success whilst others did, when the Court was not in a position to make the necessary detailed assessment to distinguish between the two categories.[32]Once again it cannot be said that the declaration sought has no practical utility, since there is an issue of principle here which would merit treatment as a preliminary issue if the Defendants had to bring claims against Tryg for the payment of losses claimed under the Reinsurances. With a very sizeable book of business in run- off (said to represent $60m), the early clarification of this issue will assist the parties in determining their respective rights. It is clear that this has been a source of complaint by Tryg for some time and that they remain dissatisfied with the answers, or lack of answers, given to their enquiries. The purposes of justice are, in my judgment, advanced by the determination of this issue.

The Third Declaration

[33]The form of the third declaration is abstract, inasmuch as it requires the Court to state that Tryg is not liable to indemnify the Defendants save on proof by the relevant Defendant that it has done that which was necessary to fall within the principles of law prescribed by the “follow the settlements” clause as interpreted by established authority. Once again, where the issue has been raised by the Reinsurer, the burden must be on the Reinsureds to establish their entitlement under the Reinsurances and under the terms of such clauses, where applicable. No express reference is made to any particular claim or group of claims and the Defendants say that the declaration sought amounts to no more than an application for an hypothetical ruling as to the parties’ rights in the absence of any actual dispute.[34]Tryg maintains that the form of declaration sought is not hypothetical in so far as the Defendants may wish to contend elsewhere in the world that English law does not have the effect for which Tryg contends. I have already found that the governing law of the Reinsurances is English law and Mr Croall accepted, on behalf of the Reinsureds that the declaration represented the true effect of English law. Once this was accepted by him in those terms Mr Millett QC accepted that there was no further need to continue with the action for such a declaration.[35]On this basis therefore I do not decide anything with regard to the underlying area of contention which was that of late notification by the underlying Insureds to the Insurers/Reinsureds as a point of defence which the Reinsureds are alleged to have failed to take.

The Fourth Declaration

[36]The Defendants maintain that, in so far as this matter gives rise to any issue at all, it is an issue as to the scope of the cover provided by the underlying policies because it was an express term of the reinsurance contracts that the cover would be “as per original policies” and because of the “back-to-back” nature of the insurance and reinsurance agreements, as they maintain them to be. Reliance is placed upon the decisions in Vesta v Butcher [1989] AC 852 and Groupama Navigation v Catatumbo [2000] 2 LLR 350. It is thus submitted that if legal costs form part of the underlying cover, they must of necessity fall within the scope of the reinsurance. It is then said that there is no real issue that such costs do fall within the scope of the underlying cover and there is therefore no issue to be tried in relation to the reinsurance cover itself.[37]The form of the declaration sought is posited on the basis that the original policies may or may not cover legal costs, fees or expenses and seeks a declaration of non-liability under the Reinsurances in respect of both costs incurred by the original assureds against the Defendants and those incurred by the Defendants themselves in relation to the underlying insurances. Under the underlying policies, it appears that the defence costs usually fall within the deductible but the terms of the underlying policies vary as to the inclusion or exclusion of legal and defence costs and call-in guarantee costs, whether regard is had to Solicitors’ fees as such or other fees and expenses involved. The position is not uniform across all of the underlying policies.[38]The evidence shows that all the underlying insurance policies are governed by Argentine law however and section 110(a) of the Insurance Law, from which there can be no derogation in favour of the Insurer, includes the legal fees of the insured in defending himself against third party claims in the scope of third party liability cover. Tryg had no answer to this point so that, in my judgment, if this were the only point, then Tryg would have no realistic prospects of success in obtaining the declaration which it seeks.[39]Tryg maintains that the reinsurance contracts contain no cover for costs and expenses at all and, in the absence of an express condition to this effect, there can be no implied term requiring Tryg to indemnify the Defendants for their share of legal costs and expenses which they have borne themselves or had to pay out to their Insureds (see Baker v Black Sea & Baltic [1996] LRLR 353). The “follow the settlements” obligation in the Reinsurances does not extend to cover legal costs incurred by the Reinsureds themselves. I did not understand this to be admitted by the Defendants but they maintained that in practice the point did not arise because Tryg had paid all the costs of investigation and defence directly. Tryg contend that they are not obliged to indemnify the Defendants for their defence costs and expenses because, if they have paid them in the past, they were not obliged to do so. The fact that the reinsurance contracts are written on an “as original” basis or that there are claims cooperation clauses does not require the Reinsurers to indemnify the Reinsured for those costs.[40]There are here issues of fact with regard to the actual costs incurred by the Reinsureds and the potential recoverability of those paid by Tryg, if sought, quite apart from those costs yet to be incurred on the run- off of this business which may take a further 5 years. There may be issues of construction, implied terms and waiver or variation to be explored and possibly of market practice (although this seems unlikely) in relation to the reinsurance contracts themselves. In my judgment, for these reasons it cannot be said that Tryg have no realistic prospects of success on this issues, nor therefore that there is no serious issue to be tried here, nor that the declaration sought would serve no useful purpose, in clarifying the parties’ rights for the balance of the run off period.

Forum conveniens

[41]The principles of law in relation to the issue of forum conveniens were not in issue between the parties. I was referred to Spiliada Maritime Corp. v Cansulex Limited [1987] AC 460 and the test set out therein when the case concerns permission to serve proceedings out of the jurisdiction:- i) The basic principle is that the claimant must satisfy the Court that England is the appropriate forum for the trial of the action, i.e. that in which the case may be most suitably tried for the interests of all the parties and the end of justice. ii) In considering the question whether there exists some other forum which is more appropriate for the trial of the action, the Court will look first to see what factors there are which point in the direction of another forum as being the natural forum. Such factors include:- a) Factors affecting convenience or expense such as the availability of witnesses; and b) Other factors such as the law governing the relevant transactions and the places where the parties reside or carry on business. iii) If the Court concludes at that stage that there is no other available forum then the burden is discharged. iv) If however the Court concludes that there is such other available forum which prima facie is clearly more appropriate it will ordinarily set aside permission to serve out unless there are circumstances by reason of which justice requires permission to be granted. In that enquiry the Court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connecting factors with the other jurisdiction. v) Permission will not be granted simply because the claimant will thereby be deprived of a “legitimate personal or juridical advantage” provided that the Court is satisfied that substantial justice will be done in the appropriate available forum. vi) Ultimately, the underlying principle is that regard is to be had to the interests to all the parties and the ends of justice.[42]It is recognised that the question of applicable law is one which weighs in the scales in deciding which is the appropriate forum. Where a dispute involves addressing complex questions of foreign law, this is a strong pointer towards the relevant foreign Court as the appropriate forum – see Dicey, Conflict of Laws 13th Edition at paragraph 12-024 and The Nile Rhapsody [1992] 2LLR 399, [1994] 1LLR 382(CA). Nonetheless the Court must consider the nature of the issues which are likely to arise in any trial, weighing up the factual evidence needed as against the issues of law which will arise, whether English law or foreign law and examine the connecting factors.[43]The Defendants contend that Argentina is the most appropriate forum for determination of the disputes between the parties. The first issue is whether or not it is an available forum for the trial of the issues raised. The answer to that is clear since it is undoubtedly open to Tryg to pursue the Defendants in Argentina where they are all domiciled. Tryg maintains that on the evidence of the law of Argentina, the Defendants would not be able to sue Tryg in that jurisdiction since the principles of that law allow for jurisdiction only in the Courts of the Defendants’ domicile or the Courts of the place of performance of the contracts in question. There is an issue between the experts on Argentine law on this point since the Defendants’ Argentine lawyers maintain that the place of performance of the reinsurance is the place where the indemnity operates in respect of the original underlying risk, in this case Argentina whilst Tryg’s experts maintain the contrary. Whether or not this is so, it matters not for current purposes since Tryg is not compelled to bring proceeding in Argentina and thereby open itself to Counterclaims from the Reinsureds, even if these English proceedings are stayed. It can wait for proceedings to be issued against it under the Reinsurances, thus testing the jurisdictional issue in Argentina and, if successful on that, wait to be sued here. Whatever the result it is not deprived of a legitimate juridical advantage on this basis. I proceed therefore on the basis that Argentina is an available forum for the trial of the declarations which Tryg seeks.[44]The evidence of the law of Argentina shows that the Argentine Courts would apply English law if, as a matter of the private international law of Argentina, such Courts considered it to be applicable. Although there was no concession on this point by the Defendants, it is relatively clear from the form of the evidence of the Defendants’ experts on Argentine law that they do not disagree with the conclusions of Tryg’s experts that, as a matter of Argentina’s private international law, the reinsurance contracts are governed by English law.[45]There are issues which arise however if English law falls to be applied to the Reinsurances by the Courts of Argentina in relation to the pessification decrees. The issue is whether or not these decrees would take precedence over the application of English law which may depend upon whether or not they are regarded as international in character and effect or “public order” law which must apply as a matter of public policy.[46]There are issues in any event as to whether or not the pessification decrees apply to the underlying insurance contracts and the deductibles set out in them. Further issues arise as to whether the pessification decrees apply to the reinsurance contracts with their international element. There are also issues of principle about the constitutionality of the pessification decrees in any event. The evidence of the Argentine lawyers on these subjects shows that there are difficult issues Argentine law and that the Courts reach decisions on a case-by-case basis on the applicability of pessification by reference to economic equity and other principles outlined in the Argentine lawyers’ reports.[47]It is against this background of the law of the Argentina that the question of forum conveniens falls to be decided.

The First Declaration

[48]I was referred to a number of authorities including CGU v Szabo [2002] 1AER Com. 83 at paragraphs 41, 42 and 52, Lincoln National Life v Employers Reinsurance [2002] EWHC 28 (Comm) at paragraphs 20 and 25, Munich Re v Commonwealth Insurance [2004] EWHC 914 (Comm) at paragraph 27 and to Prifti v Musini [2003] EWHC 2796 (Comm) where Mr Justice Andrew Smith said this:- “It is argued that because the subject matter of the Reinsurance was a Spanish risk, the commercial context of the ….. Reinsurance suggests in the absence of an express jurisdiction agreement, that the parties intended the Spanish Courts to have jurisdiction over any dispute. I do not agree. Indeed it seems to me, if anything, more natural to suppose that parties to Reinsurance underwritten in the London market would more probably expect litigation to be in the English Court.”[49]That paragraph accords with my own view of the position generally and specifically with regard to the Reinsurances in issue here. Where points of construction of English law are involved, particularly those which involve Reinsurance with conditions precedent, “full reinsurance” clauses and “follow the settlements” clauses, the natural expectation of the parties must be for the English Courts to resolve such matters.[50]I have already held that the issue raised by the application for the first declaration is essentially one of construction of the Reinsurances which are governed by English law. It is self evident that this is a point which is best decided by the English Courts, involving as it does the consideration of the authorities relied on by the Defendants to hold the Reinsurances co-extensive with the insurances where deductibles and limits are concerned. It cannot seriously be suggested that the Argentine Courts would be a more appropriate forum for this issue.[51]As Tryg point out there is a real risk that the Courts of Argentina might apply the law of Argentina to the Reinsurance contracts because of the nature of the pessification decrees, should they be found to be of an international public order nature which prevails over any other principle, or any choice of foreign law. With contracts that are governed by English law, it is right that disputes as to their meaning should be resolved by reference to that law and that law alone, whilst of course taking into account the effect of pessification, if any on the insurances and the character of the cover given to the Reinsureds in respect of their liability to their Insureds under the law of those insurance contracts.

The Second Declaration

[52]The issues raised by the application for this declaration involve both questions of law and fact. The English Court is plainly best equipped to deal with arguments about conditions precedent and notification requirements as well as any argument about waiver, estoppel or variation of the contract in the shape of alleged agreed procedures or persons to whom notice could properly be given. The evidence on these aspects also centres upon England since it can only be material emanating from Tryg itself and HSBC which could possibly bind Tryg. The exchanges between Tryg and HSBC involve English personnel and documents written in English as do the exchanges between HSBC and Surbroker, since Mr Smith is English also. The relevant documents are therefore all in English and the relevant issues on this point all involve English speaking personnel, most of whom are currently in England.[53]There is however the question of the knowledge of the Defendants of matters which are required to be notified. Self evidently this involves the position as known in Argentina. Mr Croall maintained that an extensive fact inquiry would be necessary, with Argentine witnesses, in order to resolve the issue of knowledge and that this pointed strongly in favour of Argentina as the appropriate forum. I do not accept that the inquiry would be as far reaching as he suggests nor that this would be factor which would sufficiently counter-balance the other factors in favour of England as the appropriate form in any event.[54]Tryg has made it plain that its case is based upon the knowledge of the Reinsureds as determined by the point at which the Reinsureds made estimates or reserves. It is clear that there is no difficulty in ascertaining the reserves made by the Reinsureds, nor the date of those reserves or the dates of increases in them. All will be recorded in writing and are therefore capable of being listed in a schedule comparable to Schedule 2. Insofar as any claims involving death or serious injury within the meaning of particular types of clause arise, then there will inevitably be notification in writing so that the point of knowledge of this is ascertainable from the Defendants’ own files. Of necessity there will be a need to look at the Defendants’ files, but there is unlikely to be any need for a multiplicity of witnesses to give evidence of their subjective knowledge. The files will no doubt be in Spanish but once the relevant documents have been located, translation can be effected without undue expense.[55]Moreover, even if Tryg were to seek to take a point as to the timeliness of the creation of reserves or later variation of reserves (at 50% of the deductible or at a value exceeding the deductible) such a point could only be taken on the basis of available documents. The nature of the inquiry is therefore not so intensive as the Defendants maintain and cannot, of itself, make Argentina a more appropriate forum than England in circumstances where the material will largely be scheduled and the Court’s decision will be one based upon the periods of delay involved between specified dates and the application of the conditions precedent clauses.[56]If this point was seen in isolation from the other two declarations which are currently sought, then the matter would be more evenly balanced but, given the inherent undesirability of proceedings in two jurisdictions and my finding that England is clearly the most appropriate forum for the first and fourth declarations, I find that it is clearly the more appropriate forum for the second declaration also. Whilst it is open to the Court to decide that England is the more appropriate forum for some of the declarations and Argentina for others this is, as all the authorities recognise, not a desirable result and it would only be in cases where the issues were so discrete and the position so clear as to the suitability of one Court for one set of issues and another Court for others, that this solution would ever commend itself.[57]On the second declaration I find that, for the reasons given, England is the most appropriate forum even when this element is considered in isolation but that, when considered in the light of the other proceedings between the parties, it is clearly the most appropriate forum.

The Fourth Declaration

[58]This involves an issue of construction and implied terms by reference to decided authority and just possibly to market practice. It is clear that, for much the same reasons, as for the first declaration, England is the most appropriate forum.

Material Non-disclosure

[59]The Defendants drew my attention to the principles set out in Siporex Trade SA v Comdel Commodities [1986] 2 LLR 428 at page 437 and the comments of Rix J in the Giovanna [1999] 1 LLR 867 at 875. It is trite law that an applicant must show utmost good faith and disclose his case fully and fairly when making an application without notice to the other party. He must disclose all facts which reasonably could or would be taken into account by the Judge in deciding whether or not to grant the application. The materiality of the matters to be disclosed are questions for the Court and the applicant must fulfil his duty, failing which, the Court may set aside the Order made, notwithstanding that the non-disclosure was innocent in the sense that the applicant had not realised the significance of the undisclosed material.[60]In this case, originally complaint was made as to five areas of non-disclosure but, by the time of the hearing, this had been reduced to a failure to refer to “what appeared to be established agreements and arrangements between the parties as to notification and in particular that notification was to be made to nominated adjusters/lawyers in Argentina and that not every incident required to be notified unless there was a risk of the claim exceeding the deductible.”[61]I do not consider that there is anything in this point at all. The terms of the conditions precedent clauses were detailed in the material put before the Court on the without notice applications and the argument about variation of those clauses by notification to nominated adjusters/lawyers in Argentina was not one which was either known to Tryg or would have been material to the Court. If the Court had, at that time, had before it all the material on these two points which it now has, it would not have made any difference to the application and I cannot see that there is any basis for criticising Tryg in failing to make disclosure of these specific points. In truth the non-disclosure argument adds little or nothing to the substance of the argument as to “realistic prospects of success” and “forum conveniens”.

Conclusion

[62]In the circumstances, and for the reasons set out above, I refuse to discharge the Order made for service out of the jurisdiction. With regard to the third declaration, it appears to me that the appropriate Order is to stay the proceedings for that declaration because there was, until the hearing, an issue about the application of English law, even though no request had ever been made to the Defendants as to whether or not they took issue with the principles of law sought in that declaration. Whilst the application of English law remained an issue, as it did on all the witness statements exchanged before the hearing, the application of the principles in the fourth declaration was also in issue. The practical utility of the application was limited, being inapt to cover the more detailed underlying issue of the Reinsured’s failure to take the defence of late notification by the Insureds to which I have earlier made reference.[63]It seems to me that costs must essentially follow the event. There are issues with regard to the application for the third declaration where, ultimately, it proved to be unnecessary for Tryg to proceed further. Bearing in mind the issue of the applicability of English law to the Reinsurances which underlay this, the particular matter to which it appears that the third declaration was directed, but for which it was unsuited, the limited utility of that declaration and all the surrounding circumstances, it seems to me that the right Order for the applications of the Defendants, taken as a whole, is that Tryg should have an Order in its favour for a substantial proportion, but not all, of the costs it has incurred.[64]Before making any final Orders disposing of the applications and the costs issue, I will hear the submissions of the parties. I would also wish to give directions for the future conduct of the action and will hear the parties on that also. If agreement can be reached between them, so much the better.